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Investment to Russia

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Russia Ready to Build a ‘Permanent’ Biopharma Market - Press centre

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10 August 2012

By Michael Harris, Senior Editor

Emerging market nations may be the all the rage in biopharma, and there are many countries that aspire to achieve that strategic level, but the Russian Federation wants to be more than just another BRIC in the wall.

On the relative eve of this nation’s admittance to the World Trade Organization (WTO), it is also preparing to retool its biopharma market. Getting off to a solid start involves attracting Western drugmakers, but the key to building an enduring drug industry starts at home.

The Russian government said it’s doing all the right things to facilitate and fund its domestic biopharma industry into an internationally regarded market. But the message to foreign drugmakers seeking to do business with Russia is that they should consider doing their business in Russia—rather than banking on long-distance relationships or hit-and-run deals, as Russia’s intent is to attract international partners who are willing to commit to working inside its borders and sticking around for a while.

Russia will be officially admitted to the WTO on Aug. 22. Because of that, the U.S. House Committee on Ways and Means is advancing legislation that would authorize the president to extend Permanent Normal Trade Relations (PNTR) status to Russia.

Both actions would allow for a more normalized and regulated business relationship between the U.S. and Russia and means Russia must adhere to the WTO’s distinct trade rules and standards to ensure fair commerce practices.

U.S. Trade Ambassador Ron Kirk, commenting in July, welcomed the House Committee decision to grant PNTR to Russia, but also took somewhat of a defensive posture in noting that the U.S. should be vigilant to ensure Russia abides by WTO and PNTR rules and commitments.

“Extending PNTR to Russia will also ensure that we have new tools to enforce U.S. rights, including if necessary, WTO dispute resolution, if Russia does not fully implement its commitments,” Kirk said. “We urge Congress to act as soon as possible to protect America’s interests and make sure that Russia plays by the rules of the global trading system.”

Dramatically Different Market Coming

Joseph Damond, senior vice president of international affairs and the Biotechnology Industry Organization (BIO), said the WTO and PNTR actions will facilitate augmented biopharma business development dealings between Russia and the U.S., and he envisions a dramatically different Russian biotech market in a few years that will include more international companies operating in Russia, as well as increased biopartnering and financing activity between Russian companies and Western investors and drugmakers—as long as the government can assure foreign companies that it will continue its commitment to enforcing international standards of legitimacy.

Bringing Russia into the international trade frameworks will increase transactional transparency and predictability both for U.S. and Russian companies. For the high-risk biotech sector, transparency and predictability are critical for securing investment and ensuring cost-efficiency, Damond told BioWorld Today.

“Creating a more open trade atmosphere will encourage cross-border partnerships that will ultimately help to grow the industry in Russia, and will enable other countries and companies to benefit from the important work being conducted in Russia.”

“Russia is very actively leveraging its available resources and know-how to develop its biotech market. The current level of investment activity will grow, though the pace of growth in business transactions with Russian firms will be influenced by the government’s commitment to eliminate corruption, and ensure transparency and rule of law,” he said.

Damond said the Russian government has made a strong commitment to growing the biotechnology industry within its borders, as outlined in their plan, The Comprehensive Program for Development of Biotechnology in the Russian Federation through 2020.

This document sets targets for growing the industry and creating an innovation economy in which biotechnology is a critical component by 2020. The plan outlines activities to boost financing to support R&D activities, particularly in the area of agricultural biotechnology.

By design, Russia’s admittance is expected to increase trade between member nations and corresponds with the Russian government’s mission to develop a world-class biopharma market that engenders major business development deals and attracts international partners. However, one stipulation that Russia may push to include in its biopartnering transactions is that foreign companies should consider not only working with Russia, but definitely working in Russia.

Don’t Lease—Build

Werner Cautreels, CEO of Selecta Biosciences Inc., of Watertown Mass., has experience dealing with Russia in the biopharma market and said the key to capitalizing on its emerging biopharma industry is to make the long-term commitment to operate in the nation.

“Russia wants to build a biopharma market—not lease one,” he said. “You must do R&D there and establish a legitimate presence,” Cautreels told BioWorld Today.

He cited Abbott’s acquisition of Solvay Pharmaceuticals Inc. in 2009 as an example of the quantifiable appeal that strategic markets such as Russia have in critical international business development decisions and transactions by Western biopharmas that will characterize the coming order of things in the evolving global biopharma industry. Cautreels was the general manager at Solvay at the time of that buyout transaction.

Solvay was bought for its roster of products, but its appeal was its involvement in strategic markets such as Russia, which Solvay ranked as its ninth-most active area of involvement in new business dealings at the time, as compared to its 34th-most active ranking for the U.S.

Selecta plans to conduct research in Russia for the long haul, as the company, along with a biopharma partner, Cambridge, Mass.—based BIND Biosciense Inc., will share a $50 million investment from Rusnano, a government-fundedMoscow-based open joint stock company created to invest in the development of the Russian nanotechnology industry.

As part of the agreements, Selecta and BIND have each established a wholly owned subsidiary in Moscow, called Selecta (RUS) LLC and BIND (RUS) LLC, respectively. In addition to the Rusnano investment, the financing rounds include $10 million for each company from all of Selecta’s and BIND’s existing investors as well as other new investors, specifically designated for R&D in Russia.

Though Russia is striving to foster domestic company growth in its drug market modernization efforts, the prospect for an actual transformation from emerging market to foremost market status is still likely to rely on a heavy inclusion of foreign drugmakers, investors and talent—like the Selecta/BIND/Rusnano deal—to get in league with the U.S. drug market.

Russia’s biopharma market is open to all, but it definitely wants to grow the industry on its home soil—brick by brick.

Source: BioWorld Today

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